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Instant Analysis: Burberry Sues J.C. Penney, But It Should Get Away Scot Free

By Rich Duprey - Feb 17, 2016 at 6:00PM

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The department stores sells numerous items featuring designs similar to the fashion house's famed checked pattern.

What happened?
J.C. Penney (JCPN.Q) and one of its suppliers were sued by British fashion house Burberry (BURBY -0.47%) for allegedly violating its trademarks, specifically its signature check design, by selling a wide variety of products featuring it. Burberry is seeking up to $2 million in damages.

Does it matter?
When companies don't protect their trademarks, it can lead to the dilution in the value of a brand and the profits to be derived. From aspirin and escalators to yo-yos and zippers, the products that we associate with those generic items were once trademarked as proprietary products, but over the course of time and often because of a lack of defense by their owners, the terms slipped into common usage and their marks became invalid.

J.C. Penney seemingly doesn't care that Burberry is aggrieved by the design it offers as its supplier The Levy Group has fully indemnified it, meaning no matter what the judgment is against the department store, the supplier will pay for it.

Maybe that suggests J.C. Penney learned from its previous transgressions. A few years ago Macy's (M -1.91%) sued its rival because J.C. Penney contracted with Martha Stewart to sell various housewares at its stores even though she had an exclusive arrangement with Macy's to sell similar goods. While it escaped having to pay punitive damages for the violation, J.C. Penney still faces having to pay Macy's for tortious interference.

Regardless of whether this is now standard language in its contracts with suppliers, or maybe because of it, the current misstep will have no financial impact on J.C. Penney.

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Stocks Mentioned

J. C. Penney Company, Inc. Stock Quote
J. C. Penney Company, Inc.
Macy's, Inc. Stock Quote
Macy's, Inc.
$17.97 (-1.91%) $0.35
Burberry Group plc Stock Quote
Burberry Group plc
$19.93 (-0.47%) $0.10

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